10 Things to Ask Yourself Before Retiring Abroad

retire abroad

Do you have your retirement planned out? A lot of people get so busy with their lives that they forget to think about what their retirement will look like. Retiring abroad seems like a crazy idea, but it might save you more money in the long run. Here are ten things to ask yourself before taking the leap. 

What is the average cost of living abroad? 

If your retirement savings are less than you hoped for, consider retiring in a country with a lower cost of living. Many countries in Europe and South America have cheaper rent than the United States. Right now, Panama, Ecuador, and Mexico are the top three countries that U.S. citizens are retiring to. Do your research and see if your dream country is within your reach financially. 

What is the average cost of medical care abroad? 

In some countries outside of the United States, health care is more affordable. If you’re expecting high medical bills during your retirement, consider moving to one of these countries. Mexico and France are known for their affordable healthcare. Research the location you are considering retiring to and find out what their healthcare policy is. It could save you a significant amount of money. 

Will I still have to pay income tax in the United States if I move abroad? 

You will have to file a tax return in the U.S. and your new country during your retirement. Make sure you consider your tax situation and the implications this will have on your retirement before making the move. However, if you retire abroad, you might qualify for the Foreign Earned Income Tax Exclusion and the Foreign Tax Credit 

Do I need to renounce my U.S. citizenship if I move abroad? 

You are not required to renounce your citizenship to retire abroad. Also, once you waive it, you can’t reapply to be a citizen. The decision is permanent.  

If I renounce my U.S. citizenship, do I need to pay exit tax? 

If you renounce your U.S. citizenship, there is a $2,350 fine know as the expat tax. You will also need to fill out Form 8854, and checkbox 7A for a 401k. If you have assets worth over $2 million or are within certain tax liability thresholds, you will be required to pay the exit tax.  

How do I manage my money from abroad? 

First, make sure you have online access to all your assets, including bank accounts, investments, and other financial institutions. Get all your assets in order before moving. Make sure you are prepared for startup costs when moving to a new country. You might need furniture, a deposit on your rental, or a rental car. Also, your one-way flight can be expensive. Double check that you won’t experience any holds on your accounts and tell your bank that you are moving in advance. Talk to other retirees in the country you are considering to see what other avenues are available to help you manage your money. 

How will retiring abroad affect my 401k? 

Make sure you know how your 401k will be taxed in your new country before retiring abroad. Each place has different rules. Depending on whether or not you renounce your U.S. citizenship, you may also end up owing double taxes it.   

Should I buy or rent my property abroad? 

Sometimes, buying property abroad can be risky. It is hard to know what neighborhood to target and who to trust unless you have a connection. Consider renting instead. Rent in other countries is often much cheaper than in the U.S. And if you decide you’d rather live next to that cute corner café or tropical juice bar, you can move quickly.  

Do I need a special visa to retire abroad? 

Most countries require you to obtain a visa if you plan on sticking around for a long-term visit (more than just a typical vacation). Several countries offer a retirement visa that you can apply for. Research the laws about visas in your desired country before committing to the move. And apply for the visa before renting long-term property so you can alter your plans if you are not approved. 

Am I ready for an adventure? 

Moving abroad can be beneficial for more than just your wallet. Learning a new language and navigating a new country can be good exercise for your brain. Use this opportunity to flex your cognitive and social skills. Also, traveling during retirement can improve your mood and keep things fresh and exciting. If you’re willing to take a risk and try something new, then consider retiring abroad.

This article is up to date and accounts for tax law changes for tax year 2018 (tax returns filed in 2019). Learn more about tax reform enacted under the Tax Cuts and Jobs Act here.

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